In just three short weeks, mortgage rates have spiked up over 50-basis points. This shift comes on the heels of the Bureau of Labor Statistics’ most recent employment report. This report, released last Friday, showing a much bigger than expected jump in job creation, has had a profound impact on the mortgage market. So far this week, the average rate for a 30-year fixed mortgage has fallen to 3.5%. Just a week ago, the limit was still sitting at 3.75%.
The very good employment report showed that the economy added 300,000 jobs in October, higher than the 200,000 expected by analysts. This strong job growth has fed an increase in consumer confidence, giving more people the push they need to look toward homeownership. Economists agree that a tight labor market increases housing demand. This rise in housing demand at least partly brings some much-needed stabilizing effects to the economy.
Along with strong job growth, the overall unemployment rate continued to hold at 4.2%. This stability in employment figures reinforces the idea that the job market is resilient, enabling more potential homebuyers to enter the market. It’s true that more people are getting hired each day right now. This surge in employment will clearly drive up demand for mortgages and ignite intense battle between lenders.
Mortgage industry experts hope this is the beginning of a new trend. James Wilson, a senior analyst at Mortgage Bankers Association, stated, “Lower mortgage rates combined with strong employment data create a favorable environment for homebuyers.” We hope that the lowering of rates will increase housing affordability and accessibility. This new change will be particularly helpful to first-time buyers who have been unable to get into the market in the past.
Additionally, financial analysts are predicting that this could be the case going forward if the hot labor market holds and inflationary pressures calm. Lenders are constantly recalibrating their interest rates based on the latest economic indicators. This has opened up a unique opportunity for buyers to lock in low mortgage rates.